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Balanced scorecard presentation rev 0

  1. 1. Jennifer Allen Vincent Wedelich
  2. 2.  Balanced Scorecard overview  Construction of BSC ◦ Financial ◦ Customer ◦ Internal-Business Process ◦ Learning and Growth  Linking BCS Measures to Your Strategy  Structure and Strategy
  3. 3. • Managers, like pilots, require instrumentation to monitor the journey toward future success • Balanced Scorecard provides the instrumentation
  4. 4. • Balanced Scorecard - translates mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system. • Typically organized into four different perspectives • Financial • Customer • Internal Business Processes • Learning and Growth
  5. 5. ObjectivesMeasures Targets Initiatives Vision and Strategy Financial Internal Business Processes Learning and Growth Customer “To succeed financially, how should we appear to our shareholders?” “To satisfy our shareholders and customers, what business processes must we excel at?” “To achieve our vision, how will sustain our ability to change and improve?” “To achieve our vision, how should we appear to our customers?” ObjectivesMeasuresTargets Initiatives ObjectivesMeasures Targets Initiatives ObjectivesMeasuresTargets Initiatives
  6. 6.  BSC is for strategy implementation, not strategy formulation  Four perspectives are not concrete  BSC is best implemented at SBU level  BCS is built on cause-and-effect relationships
  7. 7. ROCE On-time Delivery Customer Loyalty Process Cycle Time Process Quality Employee Skills FinancialFinancial CustomerCustomer InternalInternal Business ProcessBusiness Process Learning and GrowthLearning and Growth ROCE: Return-on-Capital-Employed
  8. 8.  Is it necessary to have a financial perspective?  Why have any others?
  9. 9.  Scorecard should start by CEO and CFO establishing long-run financial objectives  Financial objectives may change due to technology, market, or regulations  Financial objectives for all business units should be reviewed periodically
  10. 10.  Financial perspectives may differ at each stage of business’s life cycle ◦ Growth  Sales growth ◦ Sustain  ROCE, operating income, gross margin ◦ Harvest  Cash flow
  11. 11. Strategic Themes for Financial Perspective – Revenue growth and mix – Cost reduction/productivity improvement – Asset utilization/investment strategy
  12. 12. Typical Cash-to-Cash Cycle Purchase Raw Materials from Supplier Sell Product Pay Supplier for Materials Collect Cash from Customer Days Inventory Days Receivable Days Payable Cash to Cash Cycle
  13. 13. Sell Product Pay Supplier for Materials Collect Cash from Customer Negative Cash to Cash Cycle Purchase Raw Materials from Supplier Dell Cash-to-Cash Cycle
  14. 14. Internal Business Process Perspective  Identifies specific internal processes that the firm should focus on  Goal: attract & keep customers (customer satisfaction), also satisfy shareholders (meet financial goals)  This approach helps identify new processes the firm may not have implemented or thought to put into place Slide Developed by Dr. Papadopoulos.
  15. 15. Internal Business Process Perspective  The internal business process perspective model encompasses three principal business process:  Innovation process  Operations process  Postsale service Process
  16. 16. Customer Needs Identified  Innovation cycle: ◦ identify the market ◦ Create the product/Service Offering  Operations cycle: ◦ Build the Product/Services ◦ Deliver the Products/Services  Postsale service cycle ◦ Service the Customer Customer Needs Satisfied
  17. 17. Internal Business Process Perspective
  18. 18. Learning and Growth Perspective  Three principal categories for the learning and growth perspective. ◦ Employee capabilities ◦ Information systems capabilities ◦ Motivation, empowerment, and alignment
  19. 19. Learning and Growth Perspective  Helps to build and maintain the needed infrastructure a firm must have to grow and improve  3 sources: ◦ People (skills and training) ◦ Systems (technology) ◦ Organizational procedures (aligns employee incentives with the firm’s goals) Slide Developed by Dr. Papadopoulos.
  20. 20. Learning and Growth Perspective  Core employee measurement group ◦ Employee satisfaction ◦ Employee retention ◦ Employee productivity Put the graph on page 129 here.
  21. 21. Learning and Growth Perspective  Employee Satisfaction ◦ Involvement with decision. ◦ Recognition for doing a good job. ◦ Access to sufficient information to do the job well. ◦ Active encouragement to be creative and use initiative ◦ Support level from staff functions ◦ Overall satisfaction with company
  22. 22. Learning and Growth Perspective  Employee retention captures an objective to retain those employees in whom the organization has a long term interest.  Employee productivity is an outcome measure of the aggregate impact from enhancing: ◦ Employee skills ◦ Morale ◦ Innovation ◦ Improving processes ◦ Satisfying customers
  23. 23. Learning and Growth Perspective  Add pictures from book  Page 133  Page 134  Page 135  Page 140
  24. 24. Linking Balanced Scorecard Measures to Your Strategy  The scorecard describes the organizations vision of the future to the entire organization.  The scorecard creates a holistic model enabling everyone in the organization to contribute to the success of the company.  The scorecard focuses change efforts. If the right objectives and measures are identified, successful implementation will likely occur.
  25. 25. Linking Balanced Scorecard Measures to Your Strategy  The BSC should be linked to the strategy. 1) Cause and Effect Relationships. 2) Performance drivers. 3) Linkage to financials.
  26. 26. Linking Balanced Scorecard Measures to Your Strategy  Cause and Effect  A strategy is a set of hypothesis about cause and effect. Cause and effect relationships can be expressed by a sequence of if-then statements.
  27. 27. Linking Balanced Scorecard Measures to Your Strategy  Outcomes and Performance Drivers  The generic outcome measures tend to be lag indicators. ◦ Profitability ◦ Market-Share ◦ Customer satisfaction ◦ Customer retention ◦ Employee Skills
  28. 28. Linking Balanced Scorecard Measures to Your Strategy  Outcomes and Performance Drivers  The performance drivers tend to be lead indicators, these are unique for each business. ◦ Financial drivers of profitability ◦ The market segment in which the unit chooses to compete ◦ The particular internal processes and learning and growth objectives that will deliver the value propositions to target customers and market segments.
  29. 29. Linking Balanced Scorecard Measures to Your Strategy  A good balanced Scorecard should have an appropriate mix of outcomes (lagging indicators) and performance drivers (leading indicators) that have been customized to the business unit’s strategy.
  30. 30. Linking Balanced Scorecard Measures to Your Strategy  Page 154  Page 155  Page 157  Page 160
  31. 31. Structure and Strategy  This chapter illustrates the development of scorecards for organizations that are structurally different than business units: ◦ Corporations that consist of a collection of strategic business units. ◦ Joint Ventures ◦ Support departments in corporations and business units ◦ Not-for-profit and governmental enterprises
  32. 32. Structure and Strategy  A corporate scorecard requires an explicit corporate level strategy that articulates the theory of how the corporation adds value to its collection of strategic business units.
  33. 33. Structure and Strategy  A balanced scorecard can also provide substantial focus, motivation, and accountability in government and not-for- profit organizations.  The scorecard provides rationale for their existence (serving customers and constituents, not simply containing spending to within budgetary constraints), and communicating to external constituents and internal employees the outcomes and performance drivers by which the organization will achieve its mission and strategic objectives.
  34. 34. Structure and Strategy  Page 171  Page 174  Page 177  Page 178  Page 182

Hinweis der Redaktion

  • Example from page 1 – airplane.
  • Start off using it to gain clarification, consensus and focus strategy, then transform into management system
    Front line employees must understand the financial consequences of their decisions
  • To determine if department or SBU should have a scorecard – ask if it has (or should have) a mission, a strategy, customers, internal processes
    Corporate can also create BSC – to establish common framework/vision
  • ROCE may be a measure in the financial perspective. The driver of this measure could be repeat and expand sales from existing customers – which comes from high degree of loyalty. Lets say studies reveal that on-time delivery of orders is highly valued. So company needs to ask what internal processes can help achieve on-time delivery. See page 30
  • Some companies believe making fundamental improvements in their operations, the financial numbers will take care of themselves. However improved quality, response times, productivity, and new products are means to an end, not the end itself.
    Financial measurements need to be the ultimate outcome – scorecard helps keep this the focus
    Financial measures alone are inadequate for guiding and evaluating organizations thru competitive environments. They are lagging indicators
  • Sales growth – new markets and to new customers, and from new products and services
    Maximize cash that can be returned to the company from all investments made in the past. No spending on R&D
  • Revenue and Growth Mix
    New Products
    New Applications
    New Customers and Markets
    New Pricing Strategy
    Cost reduction/productivity improvement
    Increase revenue productivity
    Reduce Operating Expenses
    Reduce Unit Cost
    Asset utilization/investment
    Improve asset utilization
    Cash-to-Cash Cycle